Big Valeant Bond Investor Notifies Company of Intent to Call a Default
Investor Centerbridge cites delay in drug maker’s filing of its annual report
A large holder of Valeant Pharmaceuticals International Inc.’s bonds intends to call a default as a result of the drugmaker’s failure to file its annual report on time.
Centerbridge Partners LP has notified the company of the intention, people familiar with the matter said.
The move would start a 60-day window during which the embattled company would have to file its annual report or potentially be forced to repay the bonds early. That could trigger default notices in other pieces of Valeant’s roughly $30 billion in debt, analysts have said, and become a major additional headache.
Valeant has said it is on track to file the annual report, which was due earlier this year, by April 29. That would enable it to avoid a default.
Valeant shares declined 6% to $30 after hours on the news.
Centerbridge owns about $250 million face value of Valeant’s $1 billion bond issue due 2023, some of the people said. The notes have an annual coupon of 5.5%.
Holders of 25% of any single issuance of Valeant bonds can declare a default under certain circumstances, such as when financial statements aren’t filed on time.
Creditors often threaten to call a default to win concessions in negotiations with borrowers, rather than to force repayment. Holders of Valeant loans already secured a fee from the company in exchange for later filing deadlines and looser financial conditions.
William Ackman, a Valeant board member and one of the company’s biggest shareholders, spoke with Centerbridge executives this weekend to discuss the matter, some of the people said.
The move by Centerbridge shows how various stakeholders are jockeying for position amid turmoil at the company. The shares have lost 88% of their value from an August high as a result of a backlash against its pricing of drugs, a reduced outlook and a financial restatement that delayed the annual report. The company is in the process of replacing its chief executive, Michael Pearson.
Centerbridge manages about $25 billion. It was founded in 2005 by Jeff Aronson, a former distressed-debt investor at Angelo, Gordon & Co., and Mark Gallogly, who once headed the private-equity business at Blackstone Group LP. It manages private-equity and credit assets on behalf of pensions and other institutions.